This Week SHFE Copper Declined, Inventory Buildup Trend May Slow Down, Clearer Direction for Copper Market Awaits "Wind" [SMM Commentary]

SMM February 21: The uncertainty in global trade prospects disrupted copper price trends. Post-holiday inventory buildup exceeded the average level of previous years, putting pressure on copper prices. Additionally, price fluctuations made enterprises in the off-season even more cautious in procurement. Although tight supply on the mining side provided strong support for copper prices, SHFE copper still declined this week. As of 16:37 on February 21, LME copper fell by 0.99% to $9,469/mt, with a weekly decline of 0.08%; SHFE copper dropped by 0.47% to 77,020 yuan/mt, with a weekly decrease of 1.02%.

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Fundamentals

Spot Copper Concentrate TC Trading Center Continued to Decline This Week

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Spot copper concentrate TC trading center continued to decline this week. On February 21, the SMM Imported Copper Concentrate Index (weekly) was reported at -$10.8/mt, down by $2.13/mt from the previous period's -$8.67/mt. The pricing coefficient for domestic ore with a grade of 20% was 93%-95%. 》Click to View Details

Post-Holiday Inventory Buildup in the First Two Weeks Reached the Highest Level in Seven Years

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Domestic Inventory: As of Thursday, February 20, copper inventories in major regions nationwide monitored by SMM increased by 7,300 mt from Monday to 357,600 mt, up by 31,400 mt from last Thursday and by 191,800 mt from pre-Chinese New Year levels. The inventory buildup in the first two weeks after the holiday exceeded the same period last year by 54,400 mt, marking the highest level in seven years. Specifically, Shanghai's inventory increased by 5,700 mt from Monday to 212,100 mt, while Jiangsu's inventory rose by 5,000 mt to 64,000 mt. The main reason was the increase in domestic copper arrivals, with concentrated arrivals of delivery goods at the beginning of the week. According to statistics, Shanghai warehouse warrants currently stand at 72,900 mt, up by 19,200 mt from last Friday. Guangdong's inventory remained flat compared to Monday. Although consumption in Guangdong has recently declined, reduced arrivals have kept the total inventory relatively stable. 》Click to View Details

Overseas Inventory: This week, LME copper inventories and COMEX copper inventories showed the following changes: LME copper inventories as of February 21 were 267,750 mt, up by 12,525 mt from 255,225 mt on February 14. COMEX copper inventories as of February 20 were 97,658 short tons, down by 3,006 short tons from 100,664 short tons on February 13. With cross-market arbitrage underway, COMEX copper inventories are expected to remain at high levels.

Copper Price Fluctuations & Weak Terminal Demand Hindered Copper Cathode Rod Destocking

Copper Cathode Rod: This week, SMM surveyed the production and sales of major domestic medium and large copper rod enterprises. Overall, operating rates increased WoW but slightly declined YoY in the third week after the Chinese New Year, based on the lunar calendar. Excluding the impact of holiday shutdowns, weekly operating rates of copper rod enterprises rebounded WoW. However, consumption this week was still significantly constrained by copper price fluctuations and weak terminal demand. Downstream cargo pick-up showed a noticeable recovery only on Monday and Tuesday when copper prices fell, but new orders were suppressed again as prices rose. Meanwhile, the slow recovery of terminal consumption further hindered the destocking process of copper rod enterprises. 》Click to View Details

Outlook

Macro Front: Next week, key focuses include US and China PMI data, US Q4 GDP, and the European Central Bank's January monetary policy meeting minutes. As the Two Sessions approach, market expectations for related policies are heating up, with attention on domestic policy signals. Additionally, the impact of US tariffs on market expectations for copper and other metal demand prospects remains a concern.

Fundamentals: Looking ahead, domestic copper arrivals are expected to decrease next week due to the absence of delivery impacts, while imported copper arrivals may also decline due to unfavorable SHFE/LME price ratios. On the consumption side, with month-end approaching and copper prices still relatively high, consumption next week is likely to decrease compared to this week. Therefore, SMM expects a weak supply-demand dynamic next week, with weekly inventories likely to continue increasing. As the export window opens, some domestic smelters are planning to increase export volumes. Currently, spot market transactions remain inactive, but the inventory buildup rate has slowed. Future attention should focus on whether terminal consumption shows significant improvement.

In Summary: Macro Front: The market is in a policy waiting period ahead of the Two Sessions, with attention on potential macroeconomic benefits that could strongly support copper demand prospects. The market's trading sentiment towards US tariff policies has weakened, as reflected in the US dollar index hovering around 106.6. Fundamentals side, the tight copper mine supply situation has not improved, and raw material supply continues to provide strong support for copper prices. In the short term, imported copper arrivals are expected to decrease, with attention on the implementation of smelter copper exports. Under the weak supply-demand dynamic, the domestic inventory buildup trend may slow, but inventory pressure will continue to weigh on copper prices. Currently, the market is awaiting clearer macro or fundamental signals to guide copper prices. If the Two Sessions deliver unexpected positive outcomes, copper prices may be boosted. Conversely, if the US announces new tariffs earlier, concerns over trade prospects may continue to disrupt copper price trends. Changes in geopolitical conflicts and market risk appetite could also provide different directional guidance for copper prices. For now, the copper market is waiting for a "wind" to guide it, and before clearer signals emerge, copper price fluctuations are expected to remain limited.

Institutional Insights

Richard Horrocks-Taylor, Global Head of Metals and Mining at Standard Chartered Bank, stated that by 2050, global economic demand for copper could exceed current production by 80%-90%, with annual demand reaching 50-60 million mt. Copper prices are expected to remain "very high" over the next decade, occasionally accompanied by market weakness.

CITIC Securities Research Report: China has released the "Implementation Plan for High-Quality Development of the Copper Industry (2025-2027)." The plan aims to promote the exit of outdated domestic copper smelting capacity and optimize the industry structure, facilitating a reasonable rebound in long-term TC and profitability recovery for smelters. Additionally, accelerating resource development and project construction will enhance China's raw material security, benefiting enterprises with resource layouts. The plan is expected to positively impact the optimization of the copper industry chain, and the copper sector is rated as "outperforming the market."

Citi's latest report predicts that copper prices will drop by about 10% over the next three months, falling to $8,500/mt by early April when US import tariffs begin to impact the spot market. The bank's analysts set a 0-3 month target price at $8,500 but noted that copper prices could remain near current levels until April.

China Fortune Futures Analysis: Industrial products, including copper and aluminum, pulled back in the afternoon, partly due to weekend factors. With the Two Sessions scheduled for early March, the market will gradually focus on policy expectations, including China's 2025 economic growth target, deficit ratio, ultra-long-term bond issuance, and domestic demand stimulus policies. The firm maintains a positive strategy and a medium-term bullish outlook for copper and aluminum.

Ruida Futures Research Report: On the fundamentals side, spot copper concentrate TC indices have rapidly declined to new lows, indicating tight supply expectations. On the supply side, while the tight trend in copper concentrate supply has intensified, smelter resumption progress remains stable, with overall production still growing and unaffected by raw material supply issues. On the demand side, downstream demand has been suppressed by delayed post-holiday resumption and off-season factors. Additionally, recent copper price strength driven by overseas markets has made downstream enterprises cautious about high-priced copper, with low purchasing willingness and reliance on pre-holiday inventory. This has led to weak spot market transactions. On the inventory side, domestic social inventories have seen seasonal buildup at a rapid pace. Overall, SHFE copper fundamentals are characterized by stable supply and cautious demand.

Chaos Ternary Futures: The tight situation on the mining side persists, with spot copper concentrate TC remaining negative last week. Smelters are still in a loss-making state, and the tension between mining and smelting has not intensified, but the smelting environment remains fragile. On the demand side, domestic demand has not fully recovered, spot discounts continue, and domestic copper inventories are still accumulating. The supply-demand imbalance is not yet prominent.

Guotai Junan Futures: Continue to monitor domestic supply-demand dynamics. The Philadelphia Fed Manufacturing Index fell short of expectations, and the market remains uncertain about the impact of tariffs on US inflation and investment. Focus on the new round of manufacturing PMI data from Europe and the US overnight. Copper prices are fluctuating within a high range, with a strategy of buying on dips or staying on the sidelines.

Everbright Futures: The US dollar index fell sharply last night, pushing copper prices higher. Overall, domestic economic recovery expectations and the impact of US tariff policies are running parallel. The copper market has not shown excessive optimism or pessimism. Post-holiday, under the influence of these two expectations, copper prices have maintained an upward trend, especially as the impact of US tariff policies weakens. The market may shift focus to domestic economic recovery, but this has not yet fully materialized in copper consumption. Overall, copper prices are expected to maintain a sideways movement.

Recommended Reading:

》US Retail Data Weakens, Stagflation Pressure Rises Amid Tariff Expectations [SMM Macro Weekly Review]

》Copper Inventory in Major Regions Nationwide Increased by 7,300 mt This Week [SMM Weekly Data]

》Copper Price Fluctuations & Weak Terminal Demand Double Pressure, Copper Cathode Rod Destocking Dilemma Awaits Resolution [SMM Analysis]

》Indonesia's Copper Concentrate Export Permit Approval Imminent, Can Distant Water Quench Immediate Thirst? [SMM Copper Concentrate Spot Weekly Review]

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